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Belgium Politics

Belgium: New center-right coalition government is formed, draft budget submitted to Parliament

October 27, 2014

A new, four-party, center-right coalition government was formed in Belgium on 11 October. The coalition is composed of the right-wing separatist Flemish New Alliance (N-VA), the Christian Democratic and Flemish Alliance (CD&V), the Flemish Liberal Democrats (Open VLD), and the Reformist Movement (MR) of Charles Michel—the only Francophone party in the group. The negotiations to form the coalition lasted for 135 days after the May general elections, which was far quicker than the 18 months (541 days) it took to form a government following the previous election. The new government holds 85 of the 150 seats in the Lower House of Parliament. Flemish nationalist N-VA garnered the majority, with 33 seats. Meanwhile, the MR won 20 seats, the CD&R has 18, and, finally, Open VLD holds 14 seats.

The coalition government will be the first to include a separatist party (N-VA) at the federal government level, which could trigger some difficulties inside the group as it may boost Flemish separatist sentiment somewhat. The government will also be the first in nearly 25 years to form a coalition without the presence of the Socialist Party (PS). The absence of the PS in the government is expected to create fewer difficulties when it comes to shifting the economic policy agenda towards fiscal responsibility and pro-market reforms in the coming years.

This was reflected in the 2015 draft budget, submitted to the Parliament on 17 October. According to the budget, the government’s main objective is to improve Belgium’s economic performance, while reaching a structurally-balanced budget by 2018. To achieve these goals, the government has proposed a set of new measures, which include: reducing payroll taxes and shifting the tax burden away from labor and the costs of employment; increasing the excise duty on diesel and tobacco, while extending the VAT to some items that are currently exempt of the tax; leaving the corporate tax unchanged; and, finally, reforming the pension system.

The government’s economic agenda, which mirrors that of Flanders in many aspects, broadly fulfills Flemish citizens’ demands. However, the Francophone community appears less satisfied with the nature of the incoming government, despite the fact that new Prime Minister Charles Michel is actually French-speaking. The regional governments of Wallonia and Brussels, both of which are led by the PS, have condemned the economic measures suggested by the new federal government.

The new coalition government is likely to face questions from regional governments that are more aligned with the Francophone community’s demands. However, at the federal level, the parliamentary majority that the new coalition enjoys suggests that there will be no major obstacles for the new government to impose its economic agenda.

Author:Cecilia Simkievich, Economist

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According to a flash estimate released by the Bank of Belgium (NBB) on 29 January, GDP grew 0.5% in quarterly terms in Q4, which was an acceleration from Q3’s revised 0.2% expansion (previously reported: +0.3% quarter-on-quarter).